Italy wants to offload Monte dei Paschi’s non-performing loans portfolio before its sells the lender, a choice that is opposed by the European Commission.

The world’s oldest lender was bailed out by the state in 2017, approved by Brussels on condition of a strict restructuring plan. The bailout of the Tuscan bank carried a price tag of €30bn.

The plan envisaged that the state would liquidate its 68% majority holding by the end of 2021. However, the lender still has a bad loan portfolio of €16bn, which weighs heavily on the valuation of the bank.

To complete the privatization, the state wants to pass approximately €10bn worth of assets to its public bad loan manager, AMCO. In the private sector, shareholders can book part of the losses in a company they own; in this case, the Treasury assumes the main burden for the lenders bad-loan write-off, as AMCO is 100% state-owned.

However, EU state aid rules require that privatisations take place at market value and the Commission does not favour a major write-off, Reuters reports, citing two inside sources in Brussels. This may delay the restructuring plan, which should have been completed in the first half of 2020, pushing back the lenders’ privatization.